The Bank of Japan held its policy rate at 1.25%, as expected, while signaling vigilance on inflation and possible room for a hike as soon as December. JGB yields pared declines, the yen held gains, and the BOJ said it would accelerate ETF sales to 860 billion yen a year from January, up from 330 billion yen.
The Bank of Japan left its policy rate unchanged at 1.25%, forgoing a back-to-back hike while assessing the effects of past rate increases on lending conditions. It signaled vigilance against inflation risks, suggesting scope to raise borrowing costs as soon as December. Board member Hajime Takata dissented, proposing an unsuccessful increase to 1.5%.
Five-year Japanese government bond yields were 3 basis points lower at 2.24%, after reaching 2.22% earlier. The yen remained firmer, with the dollar down 0.2% at 157.425 yen. The Nikkei 225 fell 2.4%, with stocks largely focused on worries about AI spending.
The BOJ said it would increase annual sales of exchange-traded funds to 860 billion yen ($5.45 billion) from January, from 330 billion yen currently. Tohru Sasaki, chief strategist at Fukoku Financial Group and a former BOJ official, said he was concerned about the timing of the move in a risk-off environment.
